Apple Chief: Company Will Thrive Despite Global Economic “Malaise”

iPhone year-over-year sales will decline for the first time in the current quarter. And Apple CEO Tim Cook says that’s largely due to “the overall [economic] malaise in virtually every country in the world.”

About two-thirds of Apple’s sales come from abroad. And the slowdowns in large countries including China and Russia are “unlike anything we’ve ever seen before,” he told analysts in the company’s quarterly conference call to discuss earnings.

Apple’s sales of $75.87 billion in the quarter — slightly short of analysts’ expectations — would have been $5 billion higher if currencies had remained stable, the CEO says. He figures that sales outside of the U.S. that normally would be worth $100 now translate into $85 here following double-digit declines in other currencies while the dollar has remained strong.

With its appeal to well-to-do buyers, Apple has not been hurt by the weakening numbers in China. But during the past month it has begun to “see some signs of economic softness in greater China, notably in Hong Kong,” Cook says. Even so, “we are maintaining our investment plans” there.

He sought to reassure analysts that Apple’s fine, even if the global economy isn’t. For example, he rejected the idea that the company might develop less-sophisticated products to appeal to cash-strapped consumers. “Our strategy is always to make the best products,” Cook says. “I don’t see us deviating from that approach.”

Indeed, he says that Apple execs were “blown away by the number of Android switchers in the last quarter. It was the highest level by far.”

Apple is “continuing to invest without pause” in research and development and continues its efforts to grow in China and India as well as “markets that look fairly bleak. … We believe that this, too, shall pass. We are not retrenching. We don’t believe in that.”

In an aside, he talked up the potential of virtual reality to appeal to a mass audience. “It’s really cool.”

Execs also say that they’re encouraged about their ability to build profitable services alongside of hardware. “The assets we have in this area are huge, and it’s something the investment community would want to, and should, focus on,” Cook says.